Future Generali has launched a new traditional child insurance plan that guarantees upfront maturity benefits. It is a non-participating policy with maximum 17-year term and net return up to 5%.
The Policy Mechanics
This Education Plan intends to offer financial support to parents to fund their kid’s higher education, as soon as the child completes his schooling. Moving forward with this rationale, the maximum policy term is 17 years and the minimum is 7 years.
The formula applied for calculating the policy term = 17 - current age of your child
Thus, for a one-year old infant, the policy term automatically becomes 16 years. To avail minimum policy term, parents can purchase it for their 10-year old child.
The premiums are calculated based on factors such as parent’s age, desired sum assured, and the payout option chosen. In this new plan, three maturity payment options exist: a lump sum payout, and two part-payment options over four years.
Under lump sum payout, the sum assured is paid up-front. While in the first part-payment option, parents can avail 10% sum assured in the fourth year, 20% in the third year, 30% in the second year, and the balance of 40% on maturity. Upon selecting the second option, parents will receive 10% of the sum assured in initial three years and maturity, and the balance 70% in the fourth year.
Death Benefit: Upon the death of the policyholder, the beneficiary (child) will obtain the sum assured with added death benefits and the life insurer will waive off all the future premiums and pay on behalf of the policyholder. Moreover, the policy will instantly pay 5% of the sum assured; and on each death anniversary until the child attains the age of 17 years.
The death sum assured benefit offers= 10 times of the annual premium or 105% of the total premiums paid to date.
According to Future Generali, the return in this policy varies between 4% -5%.
Pros & Cons:
A child plan is designed to provide financial assistance to parents in fulfilling educational goals at different stages, even in case of the policyholder’s death. In Future Generali Education Plan, the beneficiary will receive 5% of the sum assured, each year during the policy term. This death benefit is a great advantage to provide an income support to the beneficiary.
However, if you are seeking it for an investment purpose, this plan has some downfalls. Returns are guaranteed but they may also be sub-optimal.
Source: This news was published on July 09, 2015 in livemint.com under the title: “Product crack: Future Generali Assured Education Plan”